3 Convicted In Bank-fund Diversion

June 20, 1986|By William B. Crawford Jr.

The former president of a Glendale Heights bank, a former bank director and a Bolingbrook lawyer were convicted by a federal court jury Thursday of charges stemming from a scheme in which $600,000 in bank funds were diverted illegally to enrich the three and bail out two faltering real estate ventures. Convicted were Edward McKeown, former president of the First Security Bank, Kevin Kehoe, a former director, and Wayne Kwiat, an attorney.

Paul Olson, former president of First Suburban National Bank, Maywood, was acquitted of all charges stemming from the scheme.

The jury reached its verdict after 10 hours of deliberations over two days. U.S. District Judge John Grady, who presided at the three-week trial, set July 22 for sentencing.

The four men along with James Elliott, of Naperville, were indicted by a federal grand jury in December on charges that they pulled off the complex fraud scheme centering on the 1982 purchase by the bank of a condominium complex in Worth and another in Orland Park.

Elliott was indicted on charges of racketeering, mail and wire fraud, and misapplication of bank funds. He has cooperated with the government, has pleaded guilty to reduced charges and is awaiting sentencing.

During final arguments Tuesday, Assistant U.S. Atty. Daniel DuPre, who prosecuted the case with Robert Beisblatt, charged that the four defendants represented ``a textbook example of how to rob a bank from the inside without using a gun or a mask.``

Testimony at trial disclosed that:

-- McKeown, as head of the Glendale Heights bank, lent $5 million to Elliott and an investor group he headed for the purchase of the Worth and Orland Park properties even though he knew the properties` value and purchase price were inflated and that appraisals had been rigged.

-- McKeown approved the loans because he had pledged about $700,000 in bank stock as collateral on a loan Elliott had made at another bank. McKeown wanted to see Elliott make a killing on the risky investment because McKeown didn`t want Elliott`s loan to go into default, causing Elliott to lose his stock.

-- Kehoe sold off the units at the Worth and Orland Park properties with Elliott, garnering excessive sales commissions, which violated Federal Deposit Insurance Corp. guidelines and which were kept hidden from FDIC auditors.

-- Kwiat, who closed many of the condominium sales at the two properties, made false entries on the federal forms, stating that Elliott and Kehoe were paid $7,500 in commission on each sale when in fact they were paid $15,000.

Olson was convicted earlier in another bank scam and was sentenced to six months in prison. He was indicted in a third bank scam and is to go on trial with several other defendants in U.S. District Court.

Elliott did not testify at the trial and his absence in the witness chair became a central theme for the defense.

Defense attorneys Paul Bradley, George Lynch, Robert Edwards and Martin Agran contended that Elliott was the mastermind behind the scheme, accusing him of being a ``manic depressive`` and a ``wonder boy salesman`` who lured the four unwitting defendants into his corrupt scheme.